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Tickers in this Article: MDVN, GILD, ONXX, RDY, UTHR, ALGN, DVA
The market is having a bad day so far: the Nasdaq has slipped 0.2%; the S&P 500 has declined 0.2%; and the Dow is trading down 0.2%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.

The Healthcare sector (XLV) is up 0.3% on a bad day for the market overall. The biggest movers in the sector are currently:
CompanyMarket CapPercentage Change
Medivation (Nasdaq:MDVN)$3.74 billion+5.2%
Gilead (Nasdaq:GILD)$46.92 billion+4.9%
Onyx Pharmaceuticals (Nasdaq:ONXX)$4.99 billion+3.7%
Dr. Reddy\'s Laboratories Limited (NYSE:RDY)$5.4 billion-3.2%
United (Nasdaq:UTHR)$2.96 billion+2.1%
Align Technology (Nasdaq:ALGN)$3.11 billion-1.9%
DaVita (NYSE:DVA)$9.31 billion+1.9%
Software Summary: Stock Screener

Rising 5.2%, Medivation (Nasdaq:MDVN) is currently trading at $106.66 per share. So far today, 221,371 shares have changed hands, on pace to finish the day below yesterday's volume of 583,213 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. The P/B ratio for MDVN is 47.19, indicating that the stock is trading for more than its book value. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Gilead (Nasdaq:GILD) has risen 4.9% to hit a current price of $65.03 per share. This morning, the company is trading a volume of 9.3 million shares. This is 1.5 times the current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for GILD is a high 4.31. This could be a good sign if the share price increases. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

After rising 3.7%, Onyx Pharmaceuticals (Nasdaq:ONXX) is currently trading at a share price of $79.50. So far today, the company's volume is 1.3 million shares, 1.1 times its current daily average. The trading volume for a stock indicates the level of investor interest. Valuation ratios allow the investor to make a quick determination as to a company's investment value. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. P/E ratio for ONXX is 255.6. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Investment Valuation Ratios: Price/Earnings Ratio

Slipping 3.2%, Dr. Reddy's Laboratories Limited (NYSE:RDY) is currently trading at $30.80 per share. The company is currently trading a volume of 91,172 shares. Volume is an important indicator because it indicates how significant a price shift is. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. RDY's PEG ratio of 0.73 is in line with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

After an increase of 2.1%, United (Nasdaq:UTHR) has reached a current price of $58.34. So far today, the company's volume is 187,633 shares, which is likely to result in less activity than yesterday's volume of 759,050 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. UTHR has a P/B ratio of 2.99 which shows that its share price is higher than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Currently trading at $37.49 per share, Align Technology (Nasdaq:ALGN) has fallen 1.9%. So far today, the company's volume is 620,327 shares. This is consistent with the average over the past three months. Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made a strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. ALGN has a high P/S ratio of 5.02. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.

DaVita (NYSE:DVA) has increased to a share price of $100.32, a 1.9% rise. So far today, the company's volume is 162,330 shares, 0.2 times the average daily volume. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. The P/E ratio for DVA is 18.0, above the industry average of 11.9. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio

The Bottom Line The nature of the market is such that stocks will have good days and bad days. Daily stock performance should be weighed against historical performance and put in context of the market overall. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.

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